Is Tornado Damage Covered by Insurance?
Posted on Wed, Jun 01, 2011
Most of the homeowners in the path of the recent tornadoes have insurance which will cover losses from the damage however, it may not be enough.
Although earthquakes and floods are not covered under standard homeowners policies, typically damage caused by tornadoes is included in the coverage.
Standard homeowners and business insurance policies cover wind damage, including that caused by tornadoes, to the structure of the building and its contents. However, you should make sure your coverage limits reflect the cost of rebuilding the structure, and of fully replacing your personal belongings.
According to a study done in 2008 by Marshall & Swift, 96% of people have homeowners insurance but 64% of U.S. homes are undervalued for insurance purposes.
That leaves homeowners with only enough money to rebuild 81% of their home, the study said.
Nationwide home values have dropped 33% in the past five years. That may have led people to think they didn't need to upgrade their insurance. But building costs, in most areas, have likely gone up.
Renters will also feel the pinch. The Insurance Research Council says that only 43% of renters have renters insurance.
What’s Covered?
In addition to coverage for the structure of your home and its contents, homeowners insurance policies also provide for additional living expenses (ALE). ALE coverage pays the costs of living away from home if you cannot inhabit your house due to damage from an insured disaster. The policy’s ALE provision covers hotel bills, restaurant meals and other living expenses incurred while your home is being repaired or rebuilt.
If you own a business that has been damaged, business income insurance (also known as business interruption insurance), covers the profits your business would have earned, based on your own financial records, had the disaster not occurred. This also covers additional operating expenses incurred as a result of the disaster, such as the extra expenses involved in operating out of a temporary location.
Damage to cars from a tornado is covered under the optional comprehensive portion of a standard auto insurance policy. 77% of insured drivers choose to purchase comprehensive coverage in addition to liability insurance, according to the National Association of Insurance Commissioners’ latest data on the issue (2008). Comprehensive coverage reimburses auto insurance policyholders for loss due to theft or damage caused by something other than a collision.
Although you might not expect a tornado to drop down in Central Massachusetts, the point is to make sure that your homeowners coverage is based on the replacement value of your home. Contact us to review your policy if you’re unsure that your coverage is sufficient.